ResMed Inc.'s (NYSE:RMD) institutional investors lost 4.5% last week but have benefitted from longer-term gains

Key Insights

• Significantly high institutional ownership implies ResMed's stock price is sensitive to their trading actions
• The top 20 shareholders own 50% of the company
• Insiders have been selling lately

Every investor in ResMed Inc. (NYSE:RMD) should be aware of the most powerful shareholder groups. And the group that holds the biggest piece of the pie are institutions with 74% ownership. That is, the group stands to benefit the most if the stock rises (or lose the most if there is a downturn).

No shareholder likes losing money on their investments, especially institutional investors who saw their holdings drop 4.5% in value last week. Still, the 34% one-year gains may have helped mitigate their overall losses. They should, however, be mindful of further losses in the future.

In the chart below, we zoom in on the different ownership groups of ResMed.

Check out our latest analysis for ResMed

What Does The Institutional Ownership Tell Us About ResMed?

Many institutions measure their performance against an index that approximates the local market. So they usually pay more attention to companies that are included in major indices.

As you can see, institutional investors have a fair amount of stake in ResMed. This suggests some credibility amongst professional investors. But we can't rely on that fact alone since institutions make bad investments sometimes, just like everyone does. It is not uncommon to see a big share price drop if two large institutional investors try to sell out of a stock at the same time. So it is worth checking the past earnings trajectory of ResMed, (below). Of course, keep in mind that there are other factors to consider, too.

Investors should note that institutions actually own more than half the company, so they can collectively wield significant power. We note that hedge funds don't have a meaningful investment in ResMed. The Vanguard Group, Inc. is currently the company's largest shareholder with 14% of shares outstanding. For context, the second largest shareholder holds about 8.4% of the shares outstanding, followed by an ownership of 4.8% by the third-largest shareholder.

After doing some more digging, we found that the top 20 have the combined ownership of 50% in the company, suggesting that no single shareholder has significant control over the company.

Researching institutional ownership is a good way to gauge and filter a stock's expected performance. The same can be achieved by studying analyst sentiments. Quite a few analysts cover the stock, so you could look into forecast growth quite easily.

Insider Ownership Of ResMed

The definition of an insider can differ slightly between different countries, but members of the board of directors always count. Company management run the business, but the CEO will answer to the board, even if he or she is a member of it.

Most consider insider ownership a positive because it can indicate the board is well aligned with other shareholders. However, on some occasions too much power is concentrated within this group.

Our data suggests that insiders own under 1% of ResMed Inc. in their own names. Being so large, we would not expect insiders to own a large proportion of the stock. Collectively, they own US$179m of stock. In this sort of situation, it can be more interesting to see if those insiders have been buying or selling.

General Public Ownership

With a 25% ownership, the general public, mostly comprising of individual investors, have some degree of sway over ResMed. While this group can't necessarily call the shots, it can certainly have a real influence on how the company is run.

Next Steps:

It's always worth thinking about the different groups who own shares in a company. But to understand ResMed better, we need to consider many other factors. For instance, we've identified 1 warning sign for ResMed that you should be aware of.

Ultimately the future is most important. You can access this free report on analyst forecasts for the company.

NB: Figures in this article are calculated using data from the last twelve months, which refer to the 12-month period ending on the last date of the month the financial statement is dated. This may not be consistent with full year annual report figures.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.